When someone is in debt, it can feel like the weight of the world is on your shoulder, that you're constantly running around to stop from drowning under the weight of it. For some people it gets too much and it feels like there is no way out, and they feel like their only option is to declare bankruptcy. There are alternatives, though, to help you breathe a little easier.
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| Credit: Drazen Zigic via Freepik |
No one ever said that raising a family would be cheap. It’s one of our biggest joys in life, but also one that comes with a lot of ups and downs, twists and turns, and unexpected expenses.
Running a household on a budget has never been easy, but the rising cost of living has led to all but the wealthiest households pinching pennies and trying to make ends meet. When you have children of your own, you always have to find a way. Sometimes, that means leaning on credit cards, lines of credit, or other types of debt to make it all work at the end of the month.
Paying back that debt can be tough, even when times get better. Debt can become a trap, and even getting that promotion or a better-paying job doesn’t mean you’ll be able to pay it all off in a timely manner. It can be even harder if you don’t see any improvements in yo
ur financial situation coming along.
That doesn’t mean there’s nothing you can do. These are some of the ways you can tackle debt or find debt relief.
Stop Borrowing New Debt
The first thing you need to do to get out of debt is stop taking on any new debts. It can be tough to avoid those credit cards, but relying on them allows you to spend beyond your means and face the consequences later.
When you carry a credit card balance month-to-month, adding another purchase to it can just feel like another drop in the bucket. This is one way that the debt trap keeps you stuck.
Keep unnecessary spending off your credit card, and avoid taking out new loans like a line of credit or payday loans.
Make a Budget to Pay Off Debt
The next step is to start budgeting. This can be a tough thing to do, but it starts with an honest look at your income and expenses. Get into your bills, your credit card statements, your grocery receipts, your gas station receipts, and every other expense you can think of that you face every month.
When it comes to things like clothing, haircuts, and occasional expenses, figure out your costs for the year and divide it by 12 so that you can set aside money for them in off-months.
Once you have all of your expenses, you can see how much you have left over to put toward debts. If you can, pay that money earlier in the month to make sure that you stick to it.
Debt Relief: Consumer Proposals
As you create this budget, you should also look at how much you owe in total. Next, use a debt calculator to find out how much it grows each month with interest rates.
You may find that with the money left in your budget, you don’t have enough to cover all of your debts, or you could discover that it would take you years to pay it all off.
When this is the result, you may have to accept that you need some form of debt relief to get out of debt. There are a few types of debt relief available. A consumer proposal is one of the more effective solutions. Although it comes with a negative mark on your credit score, it is not as harmful as bankruptcy, and there are several benefits that make it an alternative to filing for bankruptcy that makes sense.
Filing a consumer proposal can reduce the total amount that you have to pay back to your creditors. You pay back the remainder through a single monthly payment that is distributed with the help of a Licensed Insolvency Trustee. A consumer proposal also stops interest from growing on your debt, and collection actions like wage garnishment and collection calls stop.
None of your assets are at risk when you file a consumer proposal, which is an important distinction between consumer proposals vs. bankruptcies. A consumer proposal protects assets that might otherwise have to be sold in order to pay off debts in a bankruptcy.
Other Debt Relief Options: Debt Consolidation and Debt Management Plans
There are other debt relief options available to you as well, such as debt consolidation loans or debt management plans.
With debt consolidation, you take out a new loan with a lower interest rate to pay off your existing debts. This allows you to save money in the long term by paying a lower interest rate, but it can be difficult to qualify for a lower-interest loan based on your credit score.
An alternative may be a debt management plan, where you work with a credit counsellor to manage your debts and negotiate with your creditors to get you some relief on your interest payments.
You don’t have to face debt alone. Start by cutting off your reliance on new debt and making a budget. If you find that you still can’t make it work, explore your debt relief options.
That doesn’t mean there’s nothing you can do. These are some of the ways you can tackle debt or find debt relief.
Stop Borrowing New Debt
The first thing you need to do to get out of debt is stop taking on any new debts. It can be tough to avoid those credit cards, but relying on them allows you to spend beyond your means and face the consequences later.
When you carry a credit card balance month-to-month, adding another purchase to it can just feel like another drop in the bucket. This is one way that the debt trap keeps you stuck.
Keep unnecessary spending off your credit card, and avoid taking out new loans like a line of credit or payday loans.
Make a Budget to Pay Off Debt
The next step is to start budgeting. This can be a tough thing to do, but it starts with an honest look at your income and expenses. Get into your bills, your credit card statements, your grocery receipts, your gas station receipts, and every other expense you can think of that you face every month.
When it comes to things like clothing, haircuts, and occasional expenses, figure out your costs for the year and divide it by 12 so that you can set aside money for them in off-months.
Once you have all of your expenses, you can see how much you have left over to put toward debts. If you can, pay that money earlier in the month to make sure that you stick to it.
Debt Relief: Consumer Proposals
As you create this budget, you should also look at how much you owe in total. Next, use a debt calculator to find out how much it grows each month with interest rates.
You may find that with the money left in your budget, you don’t have enough to cover all of your debts, or you could discover that it would take you years to pay it all off.
When this is the result, you may have to accept that you need some form of debt relief to get out of debt. There are a few types of debt relief available. A consumer proposal is one of the more effective solutions. Although it comes with a negative mark on your credit score, it is not as harmful as bankruptcy, and there are several benefits that make it an alternative to filing for bankruptcy that makes sense.
Filing a consumer proposal can reduce the total amount that you have to pay back to your creditors. You pay back the remainder through a single monthly payment that is distributed with the help of a Licensed Insolvency Trustee. A consumer proposal also stops interest from growing on your debt, and collection actions like wage garnishment and collection calls stop.
None of your assets are at risk when you file a consumer proposal, which is an important distinction between consumer proposals vs. bankruptcies. A consumer proposal protects assets that might otherwise have to be sold in order to pay off debts in a bankruptcy.
Other Debt Relief Options: Debt Consolidation and Debt Management Plans
There are other debt relief options available to you as well, such as debt consolidation loans or debt management plans.
With debt consolidation, you take out a new loan with a lower interest rate to pay off your existing debts. This allows you to save money in the long term by paying a lower interest rate, but it can be difficult to qualify for a lower-interest loan based on your credit score.
An alternative may be a debt management plan, where you work with a credit counsellor to manage your debts and negotiate with your creditors to get you some relief on your interest payments.
You don’t have to face debt alone. Start by cutting off your reliance on new debt and making a budget. If you find that you still can’t make it work, explore your debt relief options.